Charlie Munger, vice-chairman of Berkshire Hathaway, who lived a remarkable 99 years, was much more than Warren Buffett's business partner or an investing wizard. Munger was a beacon of wisdom, integrity, and wit, influencing not only the world of investing but also imparting invaluable lessons on rational thinking and ethical living.

Munger and Buffett first met in 1959 through a mutual friend, Dr. Edwin Davis, over a dinner in Omaha, Nebraska. The meeting culminated in a long-standing partnership and friendship that would significantly influence the world of investing and business in the decades to come. Munger's broad-ranging intellectual interests combined with Buffett's business acumen shaped Berkshire into one of the most successful and investing powerhouse.

Born in 1924, incidentally in Omaha, Nebraska, on January 1, Munger went on to study mathematics at the University of Michigan and later served the US Army Air Corps as a meteorologist. After his stint in the army, he graduated from Harvard Law School and founded his own law firm in 1962. Through the '60s, even though Munger and Buffett ran their separate investment vehicles, they maintained a close relationship, frequently discussing investment ideas and strategies.

Munger's influence on Buffett was significant; he encouraged Buffett to move beyond the "cigar-butt" investing style (buying cheap, undervalued stocks) that he had learned from Benjamin Graham. In fact, at the annual meeting of the Daily Journal Corporation in 2014, Munger said: "Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him, and he was always a little afraid of what the market could do. It left him with an aftermath of fear for the rest of his life, and all his methods were designed to keep that at bay." Instead, Munger advocated investing in high-quality companies at fair prices, a strategy that would eventually become a hallmark of Berkshire Hathaway.

Incidentally, unlike Buffett, whose net worth is over $118 billion, Munger's net worth was just a little over $2 billion, primarily because, Munger who joined Berkshire in 1965, unlike Buffett, did not accumulate Berkshire shares through the original partnership that Buffett eventually took control of Berkshire.

Yet, Berkshire's success would not have come about had it not been for Munger's unique approach to investing that eventually influenced Buffett's way of thinking. Some of Buffett's notable investments came on the back of Munger's "nudge":

See's Candies: Munger was instrumental in Berkshire's acquisition of See's Candies in 1972. This investment showcased the principle of paying a fair price for a quality business, which became a cornerstone of Berkshire's investment strategy. In fact, at one point, Elon Musk tried to foray into the business of candies but gave up on the idea as he acknowledged that he could not find a chocolate or nougat that could topple See's Candies. "If a company does not provide great products and services, it should not exist," Musk said. Buffett commented at Berkshire's AGM in 2018 that Musk would be foolish to challenge See's Candies that had a powerful brand and loyal customer base which acted as a moat against competition.

Coca-Cola: Munger is often credited with influencing Buffett's decision to invest in Coca-Cola in the late 1980s. This investment reflected a shift in Berkshire Hathaway's strategy from buying cheap, lesser-quality companies to investing in high-quality businesses at reasonable prices.

BYD: Munger was a key proponent of Berkshire's investment in BYD, a Chinese electric car manufacturer, in 2008. This investment was a departure from Berkshire's traditional focus and reflected Munger's ability to recognise potential in emerging technologies and markets. "I have never helped do anything at Berkshire that was as good as BYD," Munger had said earlier this year. Berkshire's $270 million investment into BYD at its peak was valued at $8 billion.

Wells Fargo: Munger influenced the investment in Wells Fargo, seeing value in the bank's strong management and business model. This became one of Berkshire's significant holdings.

However, to view Munger from the investing prism would be doing injustice to the man whose legacy is not confined to Berkshire's glory. He was a generous philanthropist, making significant contributions to educational institutions and promoting a culture of learning and critical thinking. His support for higher education has left an indelible mark.

Some of his notable contributions include $110 million pledged to the University of Michigan in 2013 for graduate student residences, one of the largest gifts in the university's history. He also donated $65 million to the Harvard-Westlake School in Los Angeles for a new campus and to support academic programs. Stanford University also received a substantial donation for the construction of graduate student housing. "I'm deliberately taking my net worth down...My thinking is, I'm not immortal, and I won't need it where I'm going," Munger had told The Omaha World-Herald in 2013.

Despite living through some very tough moments, Munger was always an optimist. One of the most significant personal tragedies he endured was the death of his son, Teddy Munger. His 9-year-old son passed away from leukaemia in 1955, whose profound loss deeply affected Munger. In addition to this heartbreaking loss, Munger faced health challenges too. He suffered from a serious eye disease in his '30s, which resulted in him losing the sight in one eye. These personal adversities played a significant role in shaping Munger's life philosophy. He is known for his resilience, stoicism, and ability to maintain a positive and rational outlook on life despite facing such hardships. Munger often emphasises the importance of accepting the vicissitudes of life and learning from adversity, a perspective that has resonated with many who look up to him for wisdom and guidance. He humorously remarked once: "If I can stay optimistic at the brink of my life's end, surely the rest of you can cope with a bit of inflation."

While there are enough anecdotes, speeches and interviews that bring to fore Munger's life philosophy, a speech in my opinion that is one of his best is the one he gave at the Harvard School on June 13, 1986.

The topic, "How to Guarantee a Life of Misery," was a unique and effective way of conveying important life lessons. By outlining behaviours that lead to unhappiness and failure, Munger used reverse psychology to emphasise positive life principles. The gist of his speech was:

Avoid Substance Abuse: Munger warned against using chemicals to alter mood or perception, highlighting the dangers of addiction and its destructive impact on life.

Shun Envy and Resentment: He emphasised that envy and resentment are powerful negative emotions that can lead to unhappiness. By avoiding these feelings, individuals can lead more content and fulfilled lives.

Be Reliable: Munger suggested that unreliability leads to distrust and missed opportunities. Being reliable, on the other hand, builds trust and opens doors to success.

Learn from Others: He advised against relying solely on personal experience for learning. By observing and learning from the successes and failures of others, individuals can make wiser decisions and avoid common pitfalls. He thus quoted Newton: "If I have seen a little farther than other men it is because I stood on the shoulders of giants."

Be Resilient: Munger stressed the importance of resilience. He suggested that staying down after a setback is a sure path to misery, whereas bouncing back and overcoming adversity was key to a fulfilling life.

Practice Objectivity: He highlighted the importance of objective thinking, particularly in challenging personal beliefs and ideas. This kind of critical thinking leads to better decision-making and greater success. Munger said in his speech: "The life of Darwin demonstrates how a turtle may outrun the hares, aided by extreme objectivity, which helps the objective person end up like the only player without blindfold in a game of pin-the-donkey. If you minimise objectivity, you ignore not only a lesson from Darwin but also one from Einstein. Einstein said that his successful theories came from: Curiosity, concentration, perseverance, and self-criticism. And by self-criticism he meant the testing and destruction of his own well-loved ideas."

Munger's life is a testament to the power of lifelong learning, ethical integrity, and intellectual humility. The void that Munger leaves will hurt Buffett the most, but his teachings and principles will continue to guide and influence countless individuals in their personal and professional lives. Munger once said: "The best thing a human being can do is to help another human being know more." In his 99 years, Charlie did just that, leaving behind a legacy that will continue to educate, inspire, and guide us for generations to come.

See's Candies

Charlie Munger (1924-2023): A Legacy of Wisdom and Empathy